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10 August 2015


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Swami Bhut Jolokia

Nice analysis.

Charlie Wilson

Ease up on air strikes! No way! A slippery slope General! What goes next, The Kardashians!


Brig. Ali

Do you believe Erdogan can control the forces he has supported and encouraged in Syria?

China's economy and finances are an enigma. On one hand they are a powerhouse of industrial production from steel to shipbuilding to practically everything found in Walmart. They are financing and building infrastructure from railroads to highways and ports from Sri Lanka, Africa and Latin America. Now the grand Silk Road development. The scale is staggering. However, they have an enormous edifice of financial debt. Quadrupled credit outstanding since 2008. And when the massive malinvestments began to shake the credit edifice they incited speculation in equities. Now as their stock market gets unstable government institutions step in with newly conjured "money" to "purchase" 10-30% of the float. Capital flight this year is in hundreds of billions of dollars, mostly from communist party officials. These are not signs of a stable financial environment. I recently read that all this is just QE with a Chinese twist. If the Swiss National Bank can conjure francs out of thin air and buy billions of dollars of Apple stock, why can't the Chinese government?? There seems to be a non-zero probability that the Chinese politburo may have to focus their attention on their monopoly of power rather than high speed rail across the Karakoram.


FB Ali

Excellent. Excellent. As you know I am in agreement with everything you say in this piece. changing the subject slightly, General Dempsey has been subject some criticism here of late. I think we should remember that he stood firm against an air campaign against Syria in the context of the CW hoax. With regard to the CIA's sometimes separate foreign policy. This result from the aberration that exists in having an intelligence agency possess functions in covert action rather than functioning purely in the information business. In such an agency the agency inevitably begins to lobby and act for the policy it is involved in. pl

William R. Cumming

Unfortunately IMO over the next decade CIA covert ops will be expanded even by the next President, whichever party wins, and male or female!

And GEN X run corporations and their CEOs were willing to hire former military but not Millennials.


"Do you believe Erdogan can control the forces he has supported and encouraged in Syria?"
If I could ask a follow-up.
Has he unleashed years of internal trouble from IS and Kurdish supporters in Turkey who have seen him turn directly on their faction? I suspect he is in danger of turning the conversation from being about 'the civil war in Iraq & Syria' into 'the civil war in Iraq, Syria & Turkey'.

FB Ali

I doubt that Erdogan (or anyone else) can "control" or use the jihadis for their own ends, except perhaps incidentally.

As for China, I don't really know enough to predict how it will go with their plans. Chas Freeman, whose opinions I respect, seems to think their program is a big deal. See:



For FB Ali

Having spent a couple of careers as an analyst in the DC arena, I much prefer the analysis of a wise man reading the entrails. Thank you for sharing you thoughts & wisdom.


Brig. Ali,

This is an excellent analysis. With the collapse of the multipolar nuclear stalemate in the 90s, the Western Alliance turned from a protector to a predator. Recep Tayyip Erdoğan is the latest leader who jumped on the back of the tiger of war expecting to control it direction. Until there is a unified effort by mankind to contain and starve the beasts of war and exploitation, I expect that Turkey and Greece will join the league of failed states. The dead zone is expanding.

Babak Makkinejad

I really liked your phrase: "Dead Zone".

Yes, in my life time they have expanded to include the following areas of the world:

South Sudan,
Ivory Coast,
and Zaire.

ex-PFC Chuck

re “With regard to the CIA's sometimes separate foreign policy. This result from the aberration that exists in having an intelligence agency possess functions in covert action rather than functioning purely in the information business.”

According to Tim Weiner's book “Legacy of Ashes: The History of the CIA,” the covert action function not only coexisted with the information/analysis business but utterly dominated it, dating back to at least the Eisenhower presidency. Per Weiner, Allen Dulles showed his disrespect for the analytical side of the house by keeping a scale in his office and using it to weigh reports that were presented to him following weeks or months of work, then sarcastically remarking that it must be good because of how much it weighs.


ex-PFC Chuck

Yes, this has been a basic defect of CIA as an intelligence agency since its inception. This came about because of CIA's OSS ancestry. OSS was at core a covert action group as was its own ancestor SOE. pl

robt willmann

China is a real factor in the situation in the Middle East and as regards Iran. FB Ali and Jack mentioned China in comments above, and the economic side is the most significant.

In 1 minute and 20 seconds in the video excerpt below, secretary of state John Kerry actually speaks the truth, which stunned me so much I almost fell out of the chair--


Kerry emphasizes that the sanctions against Iran came into existence after much effort to get China and India to go along to get negotiations going, the subtext being that they (China and India) wanted an agreement with Iran. Plus, he reveals that the Europeans are barely hanging on with the Ukraine mess and may stop helping the U.S. there if the Iran nuclear agreement does not go forward. Kerry then says that if the U.S. now cancels the deal with Iran, but still wants the Europeans and China and India to continue to go along with the sanctions, it will blow up in our face and the sanctions will fall apart. Then, he lets slip the biggest elephant of all in the room, about which the U.S. media dare not even whisper: if the Iran deal is cancelled, it can cause "... the American dollar to cease to be the reserve currency of the world," and that subject is "already bubbling out there".

Yes, Mr. Kerry, the wind has been carrying information for quite a while that China, Russia, and other countries are fed up with the gangster foreign policy of the U.S. and the massive financial fraud: the rigged LIBOR rate, the rigged high frequency trading in the stock market, the suppressing of the gold price through the paper gold exchange, the creation by the Not-Federal Reserve Bank of trillions of dollars out of thin air to bail out certain privileged financial companies and banks, and so on. Russia and China and others are working on their own computer servers to take the place of the SWIFT system of routing orders between banks worldwide, and are starting to buy and sell oil and gas using money other than the U.S. dollar, in particular, the renminbi, the Chinese money. This means that trade in other products and commodities will start to be settled in money other than the U.S. dollar.

When the U.S. made a deal with the Saudi ruling family in the 1970's to protect it in exchange for Saudi Arabia's agreement to sell oil and gas to the world only for dollars and for no other money, the so-called Petrodollar was born. Saudi Arabia also agreed to use some of its income to buy U.S. government debt and to put some in the U.S. stock market casino. Then, all countries in the world had to buy dollars in order to buy oil and gas, and buy enough to have some on hand to do so. It became convenient for the trade of other products and commodities to be settled in dollars as well, since the other countries had to have dollars anyway to buy oil and gas. So the dollar became the "reserve" currency for the world, such that other countries and their banks had to have some in reserve to engage in trade. They could use U.S. government debt (bills, notes, bonds) as a reserve as well, to be the capital base of their banks.

This is how the U.S. gets the power to squeeze other countries and put financial sanctions in place.

But if other countries start buying oil and gas with money other than the U.S. dollar, and stop buying U.S. government debt, and start settling trade in money other than the U.S. dollar, and develop their own computer system to route bank orders, it is all over but the crying for the U.S. dominance of the world's financial and banking systems, and the ability of the U.S. to financially sanction other countries and their businesses. The dollar as the "reserve currency" in banks around the world is really where the power of the U.S. government is.

Russia has significant trade and business with Germany, and it is not just natural gas. And of course it is also doing so with China. When the U.S. stupidly did not send anyone to watch the World War II Victory Parade in Russia on 9 May 2015, who was sitting next to Putin on his right side? Xi Jinping, the president of China--



And with regard to the Middle East, Russia's position in and about Syria will probably soon be front and center.

FB Ali

I am not too familiar with these intricacies, but it is possible that one of the side-benefits of China's One Belt One Road plan is to put to productive use a big chunk of its huge USD reserves before it switches to its own reserve currency (it is putting in 46 billion USD into the China-Pakistan Economic Corridor alone!).

There have also been reports of both China and Russia buying huge amounts of gold. That would also serve the same purpose.

robt willmann

FB Ali,

Exactly. China and Russia have been buying large quantities of gold and are insisting on taking delivery of the physical metal itself and are storing it in their own countries. This also gives them the flexibility to develop gold-backed letters of credit that countries can use in trade, and the transactions will then be settled in the currencies of those countries or in the money of another country that is not the U.S. dollar.


The US dollar will not soon lose it's role as a reserve currency.

Professor Michael Pettis at Guanghua School of Management (Peking University's Business School)has a few comments about the Yuan's future as a reserve currency. It will be a long process which requires a complete change in China's currency exchange regime.


Another post about the question if the role of a reserve currency is attractive. Professor Pettis is not sure.


Both post are very lengthy but worth the time.

William R. Cumming

No one US government entity vets legal or illegal Chinese immigrants or students for PLA or CCP current or former memberships or their parents when arriving in the USA.

William R. Cumming

Another excellent and insightful comment from you with which I largely agree. Thanks!

William R. Cumming

US leadership in all circles caught napping by what may end up as a 1030% devaluation of its currency by China. Currency manipulation by China may well end the US petrodollar and its allies [the US petrodollar allies] IMO!

Babak Makkinejad

Indians expected Iran to shrivel up and die.

EU states practically expected to be able to bring to stand still normal life in Iran through their sanctions and economic warfare. For example, EU sanctions were intended to put pressure on Iran by making it impossible to import pharmaceutical drugs into Iran - say for hemophiliacs, cancer patients and others like that.

Chinese did not expect that Iranians would fold, they expected a long tough slog since they had the correct estimation of Iran.

For Chinese it was fine to go along with this hare-brained scheme of economic war against Iran by US, EU, Canada, Australia, India and others since they probably got something out of it at little consequence to themselves.

It was fine for China to have EU and India destroy their own positions in Iran and thus leaving it to her in the future, and, to further tie up US even more in the Middle Eastern mess.

China was the country that helped Iran import drugs for sick people.


Poul: Don't reserve currencies essentially require that the host country to run trade deficits? China is not ready to do that.

Seamus Padraig

I thought SOE was British?

Seamus Padraig

It is highly unlikely that the PRC will move to make the yuan into the new world reserve currency anytime soon--maybe never. Remember: if their currency were to get too strong, that would kill their mercantile export model. All of their new institutions (like BRICS and AIIB) are distinguished by the fact that they do NOT have one reserve currency, but simply rely on a basket of different currencies.


Seamus Padraig

Yup. Wild Bill Donovan the Wall Street lawyer and WW1 hero was sent by FDR to the UK to study how SOE was doing the wondrous things that they supposedly were doing. When he returned FDR had him build OSS on that model. They were completely out of control at first and Marshall succeed in getting them subordinated to him where they stayed until they escaped from DoD control when CIA was founded after WW2. Smith, Bradley F. The Shadow Warriors: OSS and the Origins of the CIA (New York: Basic, 1983) pl

FB Ali

It appears to me that their One Belt One Road program is to end their "mercantile export model" and instead switch to a continental one. I would recommend a reading of Freeman's speech (I gave the link above to Jack).

In the new model they may well not have the yuan as the reserve currency for the bloc, but instead use a basket of currencies.

I believe in the next few years the USD will no longer be the world's reserve currency, though it may well remain that for the West and its dependents.

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